Limitations to measurement

Abstract

People tend to think that accountancy is much more precise than it actually is. Only pure cash flow is free from estimating, projecting, valuing, assuming and forecasting. The normal profit and loss account is far from precise. The profit shown at the bottom line could be very different on equally valid assumptions, estimates and valuations. But the assumptions, once adopted, have a terrible tendency to be taken as reality and people using the accounts forget their doubtful foundations.